News Release

MIDDLETON, Wis.--(BUSINESS WIRE)--Apr. 26, 2018--
Spectrum Brands Holdings, Inc. (NYSE: SPB), a global consumer products
company offering a portfolio of leading brands providing superior value
to consumers and customers every day, today reported results from
continuing operations for the second quarter of fiscal 2018 ended April
1, 2018. The Company also lowered its fiscal 2018 full-year guidance.

Separately this morning, the Company announced that Executive Chairman
David M. Maura has been named Chief Executive Officer, effective
immediately, replacing Andreas Rouvé, who has stepped down as CEO and a
Director, and that its Board of Directors has authorized a new
three-year, $1 billion share repurchase program.

Spectrum Brands announced on January 3, 2018 that it was exploring
strategic options for its Global Batteries & Appliances (GBA) businesses
with the intention to sell the units by December 31, 2018. As a result,
effective with the Company’s fiscal 2018 first quarter financial
results, the GBA segment has been reclassified as held for sale and is
now reported as discontinued operations for the second quarter and six
months of fiscal 2018 and the comparable prior-year periods.

Net sales of $766.1 million in the second quarter of fiscal 2018
increased 1.3 percent compared to $756.5 million last year. Excluding
the impact of $12.3 million of favorable foreign exchange and
acquisition sales of $25.2 million, organic net sales decreased 3.7
percent versus the prior year.

Net income from continuing operations of $0.8 million and diluted
EPS from continuing operations of $0.02 in the second quarter of
fiscal 2018 decreased compared to net income from continuing
operations of $39.9 million and diluted EPS from continuing operations
of $0.68 in fiscal 2017 primarily due to higher production costs and
higher operating expenses from incremental transaction costs and
restructuring expenses.

Adjusted diluted EPS from continuing operations of $0.56 in the
second quarter of fiscal 2018 decreased 34.9 percent versus $0.86 last
year predominantly due to lower gross profit and higher interest
expense.

Operating income of $43.2 million in the second quarter of fiscal
2018 fell 58.9 percent versus $105.1 million last year as a result of
incremental restructuring costs and higher operating expenses.

Operating income margin of 5.6 percent in the second quarter of
fiscal 2018 decreased 830 basis points versus 13.9 percent last year.

Adjusted EBITDA of $115.6 million in the second quarter of fiscal
2018 declined 27.8 percent compared to $160.2 million in fiscal 2017.
Excluding the impact of unfavorable foreign exchange of $0.3 million
and acquisition EBITDA of $8.5 million, organic adjusted EBITDA of
$106.8 million decreased 33.3 percent versus the prior year.

“While our second quarter performance was very disappointing, we believe
it is in no way reflective of the underlying earnings power of our
continuing operations,” said David Maura, Chief Executive Officer of
Spectrum Brands Holdings.

“The challenges related to our two greenfield manufacturing and
distribution projects were meaningfully greater than we expected. As we
brought our East Coast distribution center into our new Hardware & Home
Improvement facility in Edgerton, Kansas at the end of February, we
experienced facility-wide disruptions which hampered distribution
capabilities materially in March,” Maura said. “Our Global Auto Care
facility in Dayton struggled at higher production levels in March, which
led to significant inefficiencies and shipping challenges.

“Given these issues, sales of about $30 million from in-house orders
could not be shipped by quarter-end due to higher customer order
backlogs at our HHI and GAC facilities, and we are working to return
them to normal efficiency levels,” he said. “In addition, cold and wet
weather in March hurt Home & Garden revenues by about $10 million as POS
declined and retailers delayed orders into April.

“Our Pet business was impacted, as expected, by the exit of a European
pet food customer tolling agreement and from lost rawhide distribution
from our recall of last spring that we will lap in June,” Maura said.
“Together, these items total about $12 million of revenues in our Pet
business.

“In addition, external cost headwinds and mix combined to deliver a
significant negative impact on our sales and margins,” Maura said.
“While we expect improvement in the back half of the year, the magnitude
of our second quarter shortfall and manufacturing and distribution
center start-up inefficiencies has caused us to lower our full-year
adjusted EBITDA guidance from continuing operations by $57 million at
the mid-point and adjusted free cash flow on a total company basis by
$135 million. It is our firm belief that the current impact to our free
cash flow is mostly transitory and largely reflects one-time investments
in working capital and customer relationships. The fact is our recovery
is already under way, and full recovery will take place gradually over
the next several quarters. We are reiterating full-year adjusted EBITDA
guidance for discontinued operations.

“Our EBITDA and margin declines were more pronounced,” Maura said. “The
most significant drivers were the late quarter major manufacturing and
distribution center operating inefficiencies as I mentioned above, and
unfavorable mix across the businesses due to cold and wet March weather.
In addition, we faced broad-based, higher commodity input costs, and
increased freight costs. We believe the U.S. facility operating
inefficiencies are transitory in nature and the adverse margin impact
from them is temporary. Second quarter margins are not representative of
the underlying margin structure of each business for the balance of this
year and over the longer-term.

“We have taken the following swift and decisive actions to improve
operations:

Replaced and strengthened key front-line talent at the Hardware & Home
Improvement (HHI) facility in Kansas and the GAC facility in Dayton

Instituted improvement plans with aggressive oversight to reduce the
temporary customer order backlogs at the HHI and GAC facilities

“Looking to the second half of the year, underlying customer demand for
our products remains healthy, our order books remain strong and we are
optimistic about regaining momentum and growth by delivering increases
in net sales and adjusted EBITDA versus the first half,” he said. “More
than 70% of POS is still ahead for our Global Auto Care and Home &
Garden businesses, new product launches are occurring across the
portfolio, we are lapping some prior-year events such as the Pet recall,
and, most importantly, we anticipate that customer order backlogs at the
HHI and GAC facilities will recede due to recent corrective actions
taken to improve operating efficiency.”

The Company remains on track to close the sale of its Global Battery and
Lighting business to Energizer Holdings for $2 billion in cash in the
second half of calendar 2018. In addition, the Company remains in active
discussions to divest, and continues to market, its Personal Care and
Small Appliances (Appliances) businesses. Although the anticipated
results of the Appliances process, including proceeds and timing, cannot
be known with certainty at this time, the Company expects to complete
the process by the end of fiscal 2018. The Company may provide future
updates as appropriate. The Company plans to use the significant net
proceeds from these divestitures to reduce debt, repurchase shares, and
increase its investment in organic growth initiatives and bolt-on
acquisitions in its remaining four businesses.

Net sales of $766.1 million in the second quarter of fiscal 2018
increased 1.3 percent compared to $756.5 million in fiscal 2017.
Excluding the impact of $12.3 million of favorable foreign exchange and
acquisition sales of $25.2 million, organic net sales decreased 3.7
percent.

Gross profit and gross profit margin in the second quarter of fiscal
2018 were $268.2 million and 35.0 percent, respectively, compared to
$306.8 million and 40.6 percent, respectively, last year. The gross
profit margin percentage decrease was primarily due to the operating
start-up inefficiencies in Hardware & Home Improvement and Global Auto
Care from the Kansas and Dayton facility consolidations described above,
along with higher input costs, weather-driven unfavorable mix, and the
negative impact of the Pet U.S. rawhide safety recall.

Operating expenses of $225.0 million in the second quarter of fiscal
2018 increased 11.6 percent compared to $201.7 million in the prior year
primarily due to acquisitions, increased restructuring and related
charges, and costs associated with the HRG Group merger.

Operating income of $43.2 million in the second quarter of fiscal 2018
fell 58.9 percent versus $105.1 million last year as a result of lower
gross margin, incremental restructuring costs and higher operating
expenses. Operating income margin of 5.6 percent in the second quarter
of fiscal 2018 decreased 830 basis points versus 13.9 percent last year.

Net income from continuing operations was $0.8 million, or $0.02 diluted
EPS, in the second quarter of fiscal 2018 on average diluted shares and
common stock equivalents outstanding of 57.2 million. In the second
quarter of fiscal 2017, net income from continuing operations was $39.9
million, or $0.68 diluted EPS, on average diluted shares and common
stock equivalents outstanding of 59.0 million. The decrease in net
income and diluted EPS was primarily due to higher production costs and
higher operating expenses from incremental transaction costs and
restructuring expenses. Adjusted diluted EPS from continuing operations
of $0.56 in the second quarter of fiscal 2018 decreased 34.9 percent
versus $0.86 last year predominantly due to lower gross profit and
higher interest expense.

As a result of the lower U.S. corporate tax rate due to recently enacted
tax reform, fiscal 2018 adjusted EPS reflects a 24.5 percent blended tax
rate versus 35.0 percent used in previous years.

Adjusted EBITDA of $115.6 million in the second quarter of fiscal 2018
decreased 27.8 percent compared to $160.2 million in fiscal 2017.
Excluding the impact of $0.3 million of unfavorable foreign exchange and
acquisition EBITDA of $8.5 million, organic adjusted EBITDA of $106.8
million decreased 33.3 percent versus the second quarter of fiscal 2017.
Reported adjusted EBITDA margin declined 610 basis points to 15.1
percent compared to 21.2 percent last year.

Net sales of $1.41 billion in the first six months of fiscal 2018
increased 4.0 percent compared to $1.36 billion for the same period in
fiscal 2017. Excluding the favorable impact of $19.8 million of foreign
exchange and acquisition sales of $50.0 million, organic net sales of
$1.34 billion in the first half of fiscal 2017 fell 1.2 percent from the
prior year.

Operating income of $77.1 million in the first half of fiscal 2018
decreased 53.6 percent from $166.3 million last year, while operating
income margin fell to 5.5 percent versus 12.2 percent in 2017 primarily
as a result of lower gross margin, incremental restructuring and
acquisition costs, and higher operating expenses.

Net income from continuing operations was $121.0 million, or $2.09
diluted EPS, in the first six months of fiscal 2018 on average shares
and common stock equivalents outstanding of 57.4 million. In the first
half of fiscal 2017, net income was $52.4 million, or $0.88 diluted EPS,
on average shares and common stock equivalents outstanding of 59.3
million. The Company generated adjusted EPS of $0.95 in the first half
of fiscal 2018, a decrease of 20.8 percent compared to $1.20 last year
primarily as a result of lower gross margin and higher operating
expenses.

Fiscal 2018 first half adjusted EBITDA from continuing operations of
$221.3 million compared to adjusted EBITDA in the first half of fiscal
2017 of $265.4 million. Excluding the unfavorable impact of $1.3 million
of foreign exchange and acquisition EBITDA of $17.3 million, organic
adjusted EBITDA of $205.3 million decreased 22.6 percent in the first
half of fiscal 2018 versus the prior year. The reported adjusted EBITDA
margin of 15.7 percent in the first half of fiscal 2018 fell 380 basis
points compared to 19.5 percent in fiscal 2017.

Fiscal 2018 Second Quarter Segment Level Data

Hardware & Home Improvement (HHI)

Three Month Periods Ended

Six Month Periods Ended

(in millions, except %)

April 1, 2018

April 2, 2017

Variance

April 1, 2018

April 2, 2017

Variance

Net Sales

$

318.5

$

313.7

$

4.8

1.5%

$

644.4

$

602.5

$

41.9

7.0%

Operating Income

19.6

45.5

(25.9)

(56.9%)

51.2

92.3

(41.1)

(44.5%)

Operating Income Margin

6.2%

14.5%

(830)

bps

7.9%

15.3%

(740)

bps

Adjusted EBITDA

45.5

56.6

(11.1)

(19.6%)

105.5

115.8

(10.3)

(8.9%)

Adjusted EBITDA Margin

14.3%

18.0%

(370)

bps

16.4%

19.2%

(280)

bps

Higher second quarter net sales were due to continued strong demand in
residential security in the U.S. and Canada, largely offset by the
distribution capacity constraints described earlier as the second of two
distribution center operations was transferred to the new Kansas
distribution center at the end of February. Excluding favorable foreign
exchange impacts of $2.5 million, organic net sales grew 0.7 percent.

Decreases in second quarter operating income, adjusted EBITDA and
margins were primarily a result of the operating start-up issues and
restructuring costs connected with the U.S. distribution center
consolidation project described above, as well as input cost inflation
and unfavorable product mix.

Global Pet Supplies (PET)

Three Month Periods Ended

Six Month Periods Ended

(in millions, except %)

April 1, 2018

April 2, 2017

Variance

April 1, 2018

April 2, 2017

Variance

Net Sales

$

211.2

$

191.8

$

19.4

10.1%

$

413.6

$

386.0

$

27.6

7.2%

Operating Income

14.9

20.1

(5.2)

(25.9%)

27.9

39.6

(11.7)

(29.5%)

Operating Income Margin

7.1%

10.5%

(340)

bps

6.7%

10.3%

(360)

bps

Adjusted EBITDA

35.7

31.9

3.8

11.9%

69.7

62.7

7.0

11.2%

Adjusted EBITDA Margin

16.9%

16.6%

30

bps

16.9%

16.2%

70

bps

Second quarter net sales increased as a result of $25.2 million of
revenues from the PetMatrix and GloFish acquisitions completed in June
and May 2017, respectively. Partially offsetting the increase was a
decline in European dog and cat food sales largely from the planned exit
of a pet food customer tolling agreement of $7.1 million, which
negatively impacted segment sales by approximately 3.7 percent. U.S.
companion animal sales were adversely by an estimated $5.0 million from
lost business as a result of the rawhide dog chew product safety recall
initiated in June 2017 as well as sluggish store traffic in the pet
specialty channel. Excluding the impact of favorable foreign exchange of
$8.5 million and acquisition sales of $25.2 million, organic net sales
decreased 7.5 percent in the second quarter.

Decreased operating income and margin were primarily driven by the
rawhide recall, related incremental production costs and operating
inefficiencies. Adjusted EBITDA and margin increased as a result of the
PetMatrix and GloFish acquisitions. Excluding favorable foreign exchange
impacts of $0.7 million and acquisition EBITDA of $8.5 million, organic
adjusted EBITDA of $26.5 million fell 16.9 percent.

Home and Garden (H&G)

Three Month Periods Ended

Six Month Periods Ended

(in millions, except %)

April 1, 2018

April 2, 2017

Variance

April 1, 2018

April 2, 2017

Variance

Net Sales

$

118.1

$

132.0

$

(13.9)

(10.5%)

$

167.4

$

181.7

$

(14.3)

(7.9%)

Operating Income

20.4

31.5

(11.1)

(35.2%)

21.1

33.1

(12.0)

(36.3%)

Operating Income Margin

17.3%

23.9%

(660)

bps

12.6%

18.2%

(560)

bps

Adjusted EBITDA

25.3

35.6

(10.3)

(28.9%)

30.7

41.3

(10.6)

(25.7%)

Adjusted EBITDA Margin

21.4%

27.0%

(560)

bps

18.3%

22.7%

(440)

bps

Lower second quarter net sales were primarily driven by significantly
reduced POS and resulting retailer order and promotional delays due to
unfavorable weather in March, slightly offset by growth in Latin
America. More than 70 percent of POS in the U.S. remains in the third
and fourth quarters of fiscal 2018.

Second quarter net sales fell slightly as higher U.S. appearance product
revenues were offset by lower performance product and refrigerant sales.
Approximately $9 million of Global Auto Care orders were in-house and
unable to be shipped at the end of the quarter due to higher order
backlogs that developed late in the quarter during work to complete the
Dayton facility consolidation project. Cold and wet weather in March
also impacted POS and retailer order timing. Excluding favorable foreign
exchange impacts of $1.3 million, organic net sales decreased 1.7
percent.

Lower operating income, adjusted EBITDA and margins were predominantly
the result of the major operating inefficiencies relating to the Dayton
facility start-up and reduced volumes described above, as well as
unfavorable mix and higher refrigerant and other input costs.

Fiscal 2018 Second Quarter and First Half Consolidated Financial
Results from Discontinued Operations

Spectrum Brands announced on January 3, 2018 that it was exploring
strategic options for its Global Batteries & Appliances (GBA) businesses
with the intention to sell the units during 2018. As a result, effective
with the Company’s fiscal 2018 first quarter financial results, the GBA
segment has been reclassified as held for sale and is now reported as
discontinued operations for the second quarter and six months of fiscal
2018 and the comparable prior-year periods.

Income from discontinued operations, net of tax, of $0.6 million and
diluted EPS of $0.01 from discontinued operations in the second quarter
of fiscal 2018 decreased compared to $18.9 million and $0.32,
respectively, in fiscal 2017. Adjusted diluted EPS from discontinued
operations of $0.30 in the second quarter of fiscal 2018 fell 9.1
percent compared to $0.33 last year.

Income from discontinued operations, net of tax, of $41.4 million and
diluted EPS of $0.72 from discontinued operations in the first half of
fiscal 2018 decreased compared to $71.7 million and $1.21, respectively,
in fiscal 2017. Adjusted diluted EPS from discontinued operations of
$1.05 in the first half of fiscal 2018 fell 12.5 percent compared to
$1.20 last year.

Liquidity and Debt

Spectrum Brands completed the second quarter of fiscal 2018 on April 1,
2018 with ample liquidity, including a cash balance of approximately
$135 million and $210 million available on its $800 million Cash Flow
Revolver.

As of the end of the second quarter of fiscal 2018, the Company had
approximately $4,468 million of debt outstanding, consisting of $571
million on its Cash Flow Revolver and a series of secured Term Loans in
the aggregate amount of $1,271 million, $2,343 million of senior
unsecured notes, and approximately $283 million of capital leases and
other obligations.

Fiscal 2018 Outlook

Spectrum Brands expects fiscal 2018 reported net sales from continuing
operations to grow above category rates for most categories, along with
an anticipated modest positive impact from foreign exchange based upon
current rates.

Fiscal 2018 adjusted EBITDA from continuing operations is now projected
to be approximately $600-$617 million versus previous guidance of
$657-$674 million and compared to $639 million in fiscal 2017. Fiscal
2018 adjusted EBITDA from discontinued operations is still expected to
be approximately $300-$310 million.

Fiscal 2018 adjusted free cash flow is now projected to be approximately
$485-$505 million compared to prior guidance of $620-$640 million.
Capital expenditures are expected to be between $110 million-$120
million.

Conference Call/Webcast Scheduled for 9:00 A.M. Eastern Time Today

Spectrum Brands will host an earnings conference call and webcast at
9:00 a.m. Eastern Time today, April 26. To access the live conference
call, U.S. participants may call 877-556-5260 and international
participants may call 973-532-4903. The conference ID number is 9059617.
A live webcast and related presentation slides will be available by
visiting the Event Calendar page in the Investor Relations section of
Spectrum Brands’ website at www.spectrumbrands.com.

A replay of the live webcast also will be accessible through the Event
Calendar page in the Investor Relations section of the Company’s
website. A telephone replay of the conference call will be available
through Thursday, May 10. To access this replay, participants may call
855-859-2056 and use the same conference ID number.

Management believes that certain non-GAAP financial measures may be
useful in certain instances to provide additional meaningful comparisons
between current results and results in prior operating periods.
Management believes that organic net sales provide for a more complete
understanding of underlying business trends of regional and segment
performance by excluding the impact of currency exchange rate
fluctuations and the impact of acquisitions.In addition, within
this release, including the supplemental information attached hereto,
reference is made to adjusted diluted EPS, adjusted earnings before
interest, taxes, depreciation and amortization (EBITDA), and adjusted
EBITDA margin.Adjusted EBITDA is a metric used by management to
evaluate segment performance and frequently used by the financial
community which provides insight into an organization’s operating trends
and facilitates comparisons between peer companies, since interest,
taxes, depreciation and amortization can differ greatly between
organizations as a result of differing capital structures and tax
strategies. Adjusted EBITDA also is one of the measures used for
determining the Company’s debt covenant.Adjusted EBITDA excludes
certain items that are unusual in nature or not comparable from period
to period. Adjusted EBITDA margin reflects adjusted EBITDA as a
percentage of net sales of the Company.Organic adjusted EBITDA
excludes the impact of currency exchange rate fluctuations and
acquisitions. The Company’s management uses adjusted diluted EPS as one
means of analyzing the Company’s current and future financial
performance and identifying trends in its financial condition and
results of operations.Management believes that adjusted diluted
EPS is a useful measure for providing further insight into our operating
performance because it eliminates the effects of certain items that are
not comparable from one period to the next.An income tax
adjustment is included in adjusted diluted EPS to exclude the impact of
the valuation allowance against deferred taxes and other tax-related
items in order to reflect a normalized ongoing effective tax rate of 35%.The Company’s management believes that adjusted free cash flow is
useful to both management and investors in their analysis of the
Company’s ability to service and repay its debt and meet its working
capital requirements.Adjusted free cash flow should not be
considered in isolation or as a substitute for pretax income, net
income, net cash from operating activities or other statement of income
or cash flow statement data prepared in accordance with GAAP or as a
measure of profitability or liquidity.In addition, the
calculation of adjusted free cash flow does not reflect cash used to
service debt and therefore, does not reflect funds available for
investment or discretionary uses.The Company provides this
information to investors to assist in comparisons of past, present and
future operating results and to assist in highlighting the results of
on-going operations.While the Company’s management believes that
non-GAAP measurements are useful supplemental information, such adjusted
results are not intended to replace the Company’s GAAP financial results
and should be read in conjunction with those GAAP results.Other
Supplemental Information has been provided to demonstrate reconciliation
of non-GAAP measurements discussed above to most relevant GAAP financial
measurements.

Forward-Looking Statements

Certain matters discussed in this news release and other oral and
written statements by representatives of the Company regarding matters
such as statements under “Fiscal 2018 Outlook” and other statements
regarding the Company’s ability to meet its expectations for its fiscal
2018 (including expectations regarding capital expenditures and its
ability to increase its net sales, free cash flow and adjusted EBITDA)
may be forward-looking statements within the meaning of the Private
Securities Litigation Reform Act of 1995. We have tried, whenever
possible, to identify these statements by using words like “future,”
“anticipate”, “intend,” “plan,” “estimate,” “believe,” “belief,”
“expect,” “project,” “forecast,” “could,” “would,” “should,” “will,”
“may,” and similar expressions of future intent or the negative of such
terms. These statements are subject to a number of risks and
uncertainties that could cause results to differ materially from those
anticipated as of the date of this release.Actual results may
differ materially as a result of (1) the impact of our indebtedness on
our business, financial condition and results of operations; (2) the
impact of restrictions in our debt instruments on our ability to operate
our business, finance our capital needs or pursue or expand business
strategies; (3) any failure to comply with financial covenants and other
provisions and restrictions of our debt instruments; (4) the impact of
actions taken by significant stockholders; (5) the impact of
fluctuations in commodity prices, costs or availability of raw materials
or terms and conditions available from suppliers, including suppliers’
willingness to advance credit; (6) interest rate and exchange rate
fluctuations; (7) the loss of significant reduction in, or dependence
upon, sales to any significant retail customer(s); (8) competitive
promotional activity or spending by competitors, or price reductions by
competitors; (9) the introduction of new product features or
technological developments by competitors and/or the development of new
competitors or competitive brands; (10) the effects of general economic
conditions, including inflation, recession or fears of a recession,
depression or fears of a depression, labor costs and stock market
volatility or changes in trade, monetary or fiscal policies in the
countries where we do business; (11) changes in consumer spending
preferences and demand for our products; (12) our ability to develop and
successfully introduce new products, protect our intellectual property
and avoid infringing the intellectual property of third parties; (13)
our ability to successfully implement, achieve and sustain manufacturing
and distribution cost efficiencies and improvements, and fully realize
anticipated cost savings; (14) the seasonal nature of sales of certain
of our products; (15) the effects of climate change and unusual weather
activity; (16) the cost and effect of unanticipated legal, tax or
regulatory proceedings or new laws or regulations (including
environmental, public health and consumer protection regulations); (17)
public perception regarding the safety of products that we manufacture
and sell, including the potential for environmental liabilities, product
liability claims, litigation and other claims related to products
manufactured by us and third parties; (18) the impact of pending or
threatened litigation; (19) the impact of cybersecurity breaches or our
actual or perceived failure to protect company and personal data; (20)
changes in accounting policies applicable to our business; (21) our
ability to utilize net operating loss carry-forwards to offset tax
liabilities from future taxable income; (22) government regulations;
(23) the impact of expenses resulting from the implementation of new
business strategies, divestitures or current and proposed restructuring
activities; (24) our inability to successfully integrate and operate new
acquisitions at the level of financial performance anticipate; (25) the
unanticipated loss of key members of senior management; (26) the effects
of political or economic conditions, terrorist attacks, acts of war or
other unrest in international markets; (27) the Company’s ability to
consummate the announced sale of our Global Battery and Lighting
business on the expected terms and within the anticipated time period,
or at all, which is dependent on the parties’ ability to satisfy certain
closing conditions, including receipt of regulatory approvals, and our
ability to realize the expected benefits of such transaction and to
successfully separate such business; (28) the outcome of the Company’
exploration of strategic options for its Personal Care and Small
Appliances businesses, including uncertainty regarding consummation of
any such transaction or transactions and the terms of such transaction
or transactions, if any, and, if consummated, the Company’s ability to
realize the expected benefits of such transaction or transactions and
potential disruption to our business or diverted management attention as
a result of the exploration or negotiation of such transaction or
transactions; (29) the Company’s ability to consummate the announced
merger with HRG Group, Inc. on the disclosed terms and within the
anticipated time period, or at all, which is dependent on the parties
ability to satisfy certain closing conditions, including favorable votes
from the required percentages of shareholders of HRG Group, Inc. and the
Company’s shareholders, and our ability to realize the expected benefits
of such transaction; (30)the transition to a new chief executive
officer and such officer’s ability to determine and implement changes at
the Company to improve the Company’s business and financial performance;
and (31) the Company’s ability to implement a successful restructuring
of the leadership of the Global Auto Care business unit with the Pet,
Home & Garden business unit to form a separate Consumer Products group,
and to realize the synergies and business and financial benefits
anticipated from such restructuring, and other risk factors set forth in
the combined securities filing of Spectrum Brands Holdings, Inc., and
SB/RH Holdings, LLC, including their most recently filed Annual Report
on Form 10-K or Quarterly Report on Form 10-Q.

Spectrum Brands Holdings also cautions the reader that its estimates
of trends, market share, retail consumption of its products and reasons
for changes in such consumption are based solely on limited data
available to Spectrum Brands Holdings and management’s reasonable
assumptions about market conditions, and consequently may be inaccurate,
or may not reflect significant segments of the retail market.Spectrum
Brands Holdings also cautions the reader that undue reliance should not
be placed on any forward-looking statements, which speak only as of the
date of this release.Spectrum Brands Holdings undertakes no duty
or responsibility to update any of these forward-looking statements to
reflect events or circumstances after the date of this report or to
reflect actual outcomes.

SPECTRUM BRANDS HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited)

Three Month Periods Ended

Six Month Periods Ended

(in millions, except per share amounts)

April 1, 2018

April 2, 2017

April 1, 2018

April 2, 2017

Net sales

$

766.1

$

756.5

$

1,412.6

$

1,358.7

Cost of goods sold

494.8

445.6

898.6

807.7

Restructuring and related charges

3.1

4.1

5.0

5.2

Gross profit

268.2

306.8

509.0

545.8

Selling

126.6

119.3

239.9

225.9

General and administrative

66.7

68.4

129.5

128.5

Research and development

7.2

7.0

14.2

13.6

Acquisition and integration related charges

4.5

3.2

9.7

6.5

Restructuring and related charges

20.0

3.8

38.6

5.0

Total operating expenses

225.0

201.7

431.9

379.5

Operating income

43.2

105.1

77.1

166.3

Interest expense

42.1

38.8

80.6

81.9

Other non-operating expense, net

1.4

2.0

2.7

0.9

(Loss) Income from continuing operations before income taxes

(0.3

)

64.3

(6.2

)

83.5

Income tax (benefit) expense

(1.1

)

24.4

(127.2

)

31.1

Net income from continuing operations

0.8

39.9

121.0

52.4

Income from discontinued operations, net of tax

0.7

18.7

41.6

71.5

Net income

1.5

58.6

162.6

123.9

Net income (loss) attributable to non-controlling interest

0.1

(0.2

)

1.0

(0.2

)

Net income attributable to controlling interest

$

1.4

$

58.8

$

161.6

$

124.1

Amounts attributable to controlling interest

Net income from continuing operations attributable to controlling
interest

$

0.8

$

39.9

$

120.2

$

52.4

Net Income from discontinued operations attributable to controlling
interest

0.6

18.9

41.4

71.7

Net Income attributable to controlling interest

$

1.4

$

58.8

$

161.6

$

124.1

Earnings Per Share

Basic earnings per share from continuing operations

$

0.02

$

0.68

$

2.09

$

0.89

Basic earnings per share from discontinued operations

0.01

0.32

0.72

1.21

Basic earnings per share

$

0.03

$

1.00

$

2.81

$

2.10

Diluted earnings per share from continuing operations

$

0.02

$

0.68

$

2.09

$

0.88

Diluted earnings per share from discontinued operations

0.01

0.32

0.72

1.21

Diluted earnings per share

$

0.03

$

1.00

$

2.81

$

2.09

Dividends per share

$

0.42

$

0.42

$

0.85

$

0.80

Weighted Average Shares Outstanding

Basic

57.1

58.8

57.4

59.1

Diluted

57.2

59.0

57.4

59.3

SPECTRUM BRANDS HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW (Unaudited)

Six Month Periods Ended

(in millions)

April 1, 2018

April 2, 2017

Cash flows from operating activities

Net income

$

162.6

$

123.9

Income from discontinued operations, net of tax

41.6

71.5

Net income from continuing operations

121.0

52.4

Adjustments to reconcile net income to net cash from operating
activities:

We define adjusted diluted EPS as reported diluted EPS excluding the
effect of one-time, non-recurring activity and volatility associated
with our income tax expense. The Company believes that adjusted diluted
EPS provides further insight and comparability in operating performance
as it eliminates the effects of certain items that are not comparable
from one period to the next. Adjustments to diluted EPS include (1)
acquisition and integration costs that consist of transaction costs from
nonrecurring acquisition transactions during the period or subsequent
integration related project costs directly associated with the acquired
business further summarized below; (2) restructuring and related costs,
which consist of project costs associated with restructuring initiatives
across the segments further summarized below; (3) purchase accounting
inventory adjustments recognized in earnings subsequent to an
acquisition; (4) non-cash asset impairments or write-offs realized; (5)
and other adjustments. During the three and six month periods ended
April 1, 2018, other adjustments consisted of estimated costs for a
non-recurring voluntary recall of rawhide product by the PET segment and
transaction costs associated with the HRG Merger. During the three and
six month periods ended April 2, 2017, other adjustments consists of
transaction costs associated with the HRG Merger. Income tax adjustment
to diluted EPS is to exclude the impact of adjusting the valuation
allowance against deferred taxes and other tax related items in order to
reflect a normalized ongoing effective tax rate, net of adjustments made
to diluted EPS. For the three and six month periods ended April 1, 2018,
the normalized ongoing effective tax rate was updated to 24.5% to
reflect a lower effective tax rate from 35% due to changes in the
enacted corporate tax rate in the United States. The following is a
reconciliation of reported diluted EPS to adjusted diluted EPS for the
three and six month periods ended April 1, 2018 and April 2, 2017,
respectively:

The following is a summary of net sales by segment for the three and six
month periods ended April 1, 2018 and April 2, 2017, respectively:

Three Month Periods Ended

Six Month Periods Ended

(in millions, except %)

April 1, 2018

April 2, 2017

Variance

April 1, 2018

April 2, 2017

Variance

HHI

$

318.5

$

313.7

4.8

1.5

%

$

644.4

$

602.5

41.9

7.0

%

PET

211.2

191.8

19.4

10.1

%

413.6

386.0

27.6

7.2

%

H&G

118.1

132.0

(13.9

)

(10.5

%)

167.4

181.7

(14.3

)

(7.9

%)

GAC

118.3

119.0

(0.7

)

(0.6

%)

187.2

188.5

(1.3

)

(0.7

%)

Total

$

766.1

$

756.5

9.6

1.3

%

$

1,412.6

$

1,358.7

53.9

4.0

%

We define organic net sales as reported net sales excluding the effect
of changes in foreign currency exchange rates and acquisitions. We
believe this non-GAAP measure provides useful information to investors
because it reflects regional and operating segment performance from our
activities without the effect of changes in currency exchange rate
and/or acquisitions. We use organic net sales as one measure to monitor
and evaluate our regional and segment performance. Organic growth is
calculated by comparing organic net sales to reported net sales in the
prior year. The effect of changes in currency exchange rates is
determined by translating the period’s net sales using the currency
exchange rates that were in effect during the prior period. Net sales
are attributed to the geographic regions based on the country of
destination. We exclude net sales from acquired businesses in the
current year for which there are no comparable sales in the prior
period. The following is a reconciliation of reported sales to organic
sales for the three and six month periods ended April 1, 2018 compared
to reported net sales for the three and six month periods ended April 2,
2017, respectively:

Adjusted EBITDA (Earnings Before Interest, Taxes, Depreciation,
Amortization) is a non-GAAP metric used by management that we believe
provides useful information to investors because it reflects ongoing
operating performance and trends of our segments excluding certain
non-cash based expenses and/or non-recurring items during each of the
comparable periods and facilitates comparisons between peer companies
since interest, taxes, depreciation and amortization can differ greatly
between organizations as a result of differing capital structures and
tax strategies. Further, adjusted EBITDA is a measure used for
determining the Company’s debt covenant. EBITDA is calculated by
excluding the Company’s income tax expense, interest expense,
depreciation expense and amortization expense (from intangible assets)
from net income. Adjusted EBITDA further excludes: (1) stock based
compensation expense as it is a non-cash based compensation cost; (2)
acquisition and integration costs that consist of transaction costs from
acquisition transactions during the period, or subsequent integration
related project costs directly associated with the acquired business as
previously summarized; (3) restructuring and related costs, which
consist of project costs associated with restructuring initiatives as
previously summarized; (4) non-cash purchase accounting inventory
adjustments recognized in earnings subsequent to an acquisition; (5)
non-cash asset impairments or write-offs realized; (6) and other
adjustments. During the three and six month periods ended April 1, 2018,
other adjustments consist of estimated costs for a non-recurring
voluntary recall of rawhide product by the PET segment and transaction
costs associated with the HRG Merger. During the three and six month
periods ended April 2, 2017, other adjustments consist of transaction
costs associated with the HRG Merger. Adjusted EBITDA margin is
calculated as adjusted EBITDA as a percentage of reported net sales for
the respective period. Organic adjusted EBITDA is calculated by
excluding the effect of changes in currency exchange rates and adjusted
EBITDA contributed from acquired businesses in the current year. The
following is a reconciliation of reported net income to adjusted EBITDA
for the three month periods ended April 1, 2018 and April 2, 2017,
including the calculation of adjusted EBITDA margin for each of the
respective periods, and organic adjusted EBITDA for the three month
period ended April 1, 2018:

The following is a reconciliation of reported net income to adjusted
EBITDA for the six month periods ended April 1, 2018 and April 2, 2017,
including the calculation of adjusted EBITDA margin for each of the
respective periods, and organic adjusted EBITDA for the six month period
ended April 2, 2017:

The following is a reconciliation of forecasted adjusted EBITDA for the
fiscal year ending September 30, 2018:

(in millions)

Cont. Ops

Disc Ops

Total

Net income

$

235 - 249

$

93 - 101

$

328 - 350

Income tax (benefit) expense

(58) - (55)

17 - 19

(41) - (36)

Interest expense

161 - 167

54 - 58

215 - 225

Depreciation and amortization

122 - 127

73 - 78

195 - 205

EBITDA

468 - 485

243 - 253

711 - 738

Share based compensation

9

1

10

Acquisition and integration related charges

12 - 13

54 - 56

66 - 69

Restructuring and related charges

56 - 60

1

57 - 61

Inventory acquisition step-up

1

—

1

Pet safety recall

13 - 15

—

13 - 15

Other

37 -3 9

—

37 - 39

Adjusted EBITDA

$

600 - 617

$

300 - 310

$

900 - 927

ADJUSTED FREE CASH FLOW

Our definition of adjusted free cash flow, which is a non-GAAP financial
measure, takes into consideration capital investments required to
maintain the operations of our businesses and execute our strategy. We
believe adjusted free cash flow provides useful information to investors
regarding our ability to generate cash from business operations that is
available for acquisitions and other investments, service of debt
principal, dividends and share repurchases and meet its working capital
requirements. Our definition of adjusted free cash flow may be different
from definitions used by other companies. We also use adjusted free cash
flow, as defined, as one measure to monitor and evaluate performance.
The following is a reconciliation of the Company’s forecasted adjusted
free cash flow for the fiscal year ending September 30, 2018: